Ordinary Hong Kong people who want to get an apartment of their own may be at a loss these days, even if they seem able to afford a down payment and monthly installment. The city's home prices have ridden a rocket-like recovery after a temporary fall during the financial crisis. Property analysts believe many of the city's properties are no longer worth investing.

"Hong Kong home buyers who missed the last entry point are in pain right now, especially those who are determined to have a place of their own," CLSA's property research head Nicole Wong told China Daily.

"It takes an average household 46 years to earn enough for an average 500 square-foot home in Hong Kong right now, and home prices show no sign of going down, which are already very, very expensive," she said.

The last good entry point was not the period in early 2009, when the latest price correction bottomed out, but when house prices went all the way down from their historic high in 1997 to a recent-years low in 2003, a "70 percent slump" according to Wong.

"In 2003, you could buy some apartments for only HK$4,000 per square foot on the city's most prestigious Peak. Right now, you could buy only one tenth," she said.

The Hong Kong government in July auctioned a prime residential site in Peak district at a sky-high price of HK$32,000 per square foot of gross floor area.

Analysts said the development project could end up including apartment units for sale at HK$40,000 per square foot of finished gross floor area and individual houses for sale at up to HK$70,000 per square foot.

Even though prices for luxury homes are steaming ahead, Wong said they may be the only type of properties worth investing in at the moment because most mainland investors who buy properties here target the high-end market.

"We could expect prices of luxury homes to keep climbing as money is not a problem," she said.

Middle- and low-end homes are likewise very costly, and most ordinary Hong Kong residents may have to set aside more than half of their incomes for mortgage installments when interest rates go back up.

According to statistics complied by CLSA, the number of both high-income households earning more than HK$40,000 a month and low-income households with incomes of less than HK$20,000 a month have grown significantly since 1997, while the sandwich group in the middle has barely changed in size.

As home prices have shot up, many in the middle-income range have found themselves in a bad spot and they may end up buying into a life-long burden rather than a sweet home.

Another research head at CLSA, Francis Cheung, agrees with Wong that the city's home prices are very expensive and it is hard to find a good entry point now even with a long-term perspective.

Though home prices are beyond the affordability of many people in the city, Cheung believes the market is still sound, as Hong Kong's property market is "very mature."

"Unlike many mainlanders who believe that home prices will never collapse because the government will always back them up, Hong Kong people have experienced ups and downs in the property market and they are more cautious," Cheung said.

According to the city's leading property broker house Centaline, both home prices and rental rates in the private residential property market are fast approaching the record levels of 1997 when the city's real estate market peaked.

"The rental rates will also keep on climbing at a pace of 15 to 20 percent a year or so," said Wong. "This upward trend is showing no signs of reversing."

China Daily

(HK Edition 08/17/2010 page3)